Comments
SEBI’s risk management review committee has prescribed the default waterfall — the order in which a clearing corporation applies different types of its financial resources to meet a default loss, such as margins brought in by the defaulting participant, clearing funds and its own assets.
The first to be used would be the monies of the defaulting member, including any excess monies of the defaulter in other segments. Next would be insurance followed by the clearing corporation’s (CC) resources of up to 5 per cent of the minimum required corpus.
The core settlement guarantee fund (SGF) would be used in the following order — first would be penalties followed by a minimum of 25 per cent of the segment minimum required corpus.
Then the remaining contribution of the CC, SE and non-defaulting members’ primary contribution to the core SGF on a pro-rata basis would be used to make good the loss.
The last in the list would be any remaining CC resources, contribution of CC/SEs to core SGFs of other segments capped at additional contributions by non-defaulting members (which means contribution by non-defaulting members would be capped in case of default by other members). Any further losses would be covered through pro-rata hair cut to payouts.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.